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Tax Identity Theft Fraud

By Ryan L. Kaiser, CFE, Assistant Fraud Risk Manager, Canandaigua National Bank & Trust

It’s that time of year again – tax returns are due on April 18th and “tax season” also means it’s “tax fraud season” for bad actors. Tax identity theft occurs when someone obtains your personal information, files a fraudulent tax return, and claims a refund on your behalf. Below are some warning signs that this scheme could be occurring, how to mitigate related risks, and next steps to take if you are victimized.

Know The Warning Signs

  • You receive a letter from the IRS inquiring about a tax return which you did not initiate.
  • You are unable to e-file your return due to a duplicate SSN.
  • You receive a tax transcript in the mail which you didn’t request.
  • You receive an IRS notice that an online account has been created in your name.
  • You receive a notice from the IRS which states your existing online account has been accessed or disabled.
  • You receive an unexpected IRS notice stating you owe additional tax.
  • IRS records show income received from an employer which you’ve never worked for.
  • You receive notice that an Employer Identification Number (EIN) has been assigned to you, but you never requested one.

Best Practices to Mitigate Risk

  1. Protect sensitive documents. Store tax records and social security cards in a safe location. When disposing of old tax documents or other paperwork with sensitive personal information, ensure they are fully shredded.
  2. Use enhanced security settings. Particularly if you use tax preparation software such as TurboTax or Intuit, use multi-factor authentication wherever available. MFA offers an additional layer of security by requiring additional credentials to log in to a given account, such as a one-time password. Also, always utilize security software with firewall and anti-virus protections!
  3. Be aware of social engineering attempts and malware threats. Do not ever provide your personal information to someone who contacts you stating they are from the IRS. Bad actors initiate fraudulent outreach attempts through various channels to obtain personal information – phone calls, text messages, emails, even snail mail. Do not click on links or download attachments from unknown or suspicious text messages or emails.

How to Respond

If your SSN is compromised and you know or suspect you are a victim of tax-related ID theft, the IRS recommends the following actions –

  1. Respond immediately to any IRS notice – find contact info at IRS.gov.
  2. If your e-filed return is rejected due to a duplicate filing, or if the IRS instructs you to do so, complete IRS Form 14039 (Identity Theft Affidavit). Use a fillable form at IRS.gov, print, then attach form to your paper return and mail according to instructions.
  3. Continue to pay your taxes and file your tax return, even if you must do so by paper.
  4. If you previously contacted the IRS and did not have a resolution, contact them again for specialized assistance at 1-800-908-4490.
  5. A complaint can be filed with the FTC if desired, at identitytheft.gov
  6. Consider contacting one of the three major credit bureaus to place a ‘fraud alert’ on your credit records.